I discuss critical issues that affect welfare of Malawians. My blog is informative and I hope Malawi will be a better country if some of the issues I raise are addressed.

Friday, July 12, 2013

Affirmative action in public-private partnerships

A senior politician recently remarked about the ownership of prime properties in urban centres. The observation was right as it so rare to see commercial properties in urban centres owned by indigenous Malawians. The remarks came after the land bill was passed by parliament in which foreigners can only lease land but not own it. Infact, they should lease land with a title and pay monthly rent to the freeholder or government, if it is public land.
We have heard of rude and derogatory lines like “dziko ndi wanu ndalama ndi wathu many times and this calls into how Malawi can put in place necessary affirmative actions to ensure increased participation in business by indigenous persons or the majority of some kind. Generally, I would hail the Land Act as a right step to ensure the majority of Malawians are empowered economically by owning their land, and reaping benefits to educate their children. It could even be better if foreign businesses would lease land that has a title to indigenous owners and pay rent on a monthly basis.
Since 1994, we have seen a wave of privatisation of public corporations and the establishment of the Malawi Stock exchange(MSE). It has opened a number of opportunities for individual investors to put their funds into some of these companies. But a majority of individuals, or to be precise, indigenous Malawians have not been favoured but preference given to foreigners, especially those corporations that have not listed on the MSE. This is where I have a problem, not just out of national pride or patriotism, neither ambivalence to foreigners, but the billions of tax payer’s money put in establishing these public corporations. Either the capital injected at the onset was a grant or loan; such funds are naturally intended to benefit Malawians and we continue to service debts anyway. It is naturally imperative, that indigenous Malawians should be given preference in owning public companies that go through the hammer by a deliberate affirmative law that defines ownership structure. In some cases, the ownership can be established by law. Otherwise, it is so easy to loose all our key investments to foreigners for a dollar simply because we want to balance the national budget.
It is interesting to see how we have tackled affirmative action in this country. Consider the case of the Quota system in selecting students to Universities and national secondary schools. I hold my own opinions, but it has hallmarks of affirmative action despite its controversy. We can draw some parallels and see how it can be applied to public-private partnerships.
In Zimbabwe, they have taken affirmative action with respect to foreign direct investment particularly in key national industries such as mining and invested heavily in education. Literacy rates are the highest in Zimbabwe than any other sub-Saharan Africa by the way. It does not mean that we have to increase literacy rates before addressing the issue of ownership of privatised companies or major natural resource investments. The ownership in Zimbabwe is set at 50%-50% for major investments to ensure locals have opportunities in economic development. It empowers the indigenous people in a much great way than a fertiliser subsidy. In our case, for instance we have 15% ownership in a major mine.
I would think the reasoning of the quota system should be applied to our natural resource industries, especially with prospects in oil and immediate opportunities in mining. In the United States for example, no foreign investor can own more than 25% of any airline.
Now that we are taking major strides in strengthening public-private partnerships, the relationships need to be clearly defined to benefit Malawians, particularly indigenous citizens that call villages in rural Malawi home. We can put this to reality. Precisely, we need to urgently enact laws that stipulate in clear terms that public corporations going for sale or investments in mining/oil have a 50% ownership by indigenous Malawian though a public citizen trust fund. There are many ways of doing it. One route is through a Malawi Trust Fund, whose sole responsibility is to safeguard our economic and business interests as indigenous citizens including potential environmental hazards. People do not take pride in asking for handouts such as fertilisers or farm inputs, but have dreams just like the few favoured foreign elites that control business or get all deals when public corporations are privatised. Most of us would like to see the 31% stake that government intends to sell to the public in the Malawi Airways go to indigenous Malawian investors.
While public-private partnerships appear as an attractive liberal public finance restructuring paradigm of modern day investments, we simply cannot ignore benefits that come with affirmative action policies in business that favour the most vulnerable. It is one straight path towards financial and economic independence that we do not have after 49 years of the Republic.
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About Me

I blog on issues of economic development such as education, corruption, health, business and poverty. I also write a weekly column in The Malawi Nation Newspaper (www.mwnation.com) that appears every Friday-the title of my column is "Business Intelligence"